What changed in this filing

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Item 1. Business

2022-04-18 compared with 2021-04-15 · 82 added, 94 removed, 159 unchanged (53% of the section changed)

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We are a provider of modular facilities (“Modules”).

Prior to the COVID-19 pandemic, the Modules we supplied were primarily for multi-family housing, military and restaurant use and were manufactured by third party suppliers using our proprietary technology and design and engineering expertise, which modifies code-engineered cargo shipping containers and purpose-built modules for use for safe and sustainable commercial, industrial and residential building.

With our acquisition in September 2020 of Echo DCL, LLC (“Echo”), one of our key supply chain providers, we now have more control over the manufacturing process and have increased our product offerings to add containers made out of wood.

Prior to the COVID-19 pandemic, the Modules we supplied were primarily for retail, restaurant and military use and were manufactured by third party suppliers using our proprietary technology and design and engineering expertise, which modifies code-engineered cargo shipping containers and purpose-built modules for use for safe and sustainable commercial, industrial and residential building.

In March 2020, in response to the COVID-19 pandemic we began increasing our focus on providing our Modules as health care facilities for deployable medical response solutions.

Our partnership with Clarity Lab Solutions, LLC (“Clarity Labs”) in Miami, Florida, a CLIA-certified laboratory, has allowed us to provide laboratory testing at our Modules.

In addition, to providing our Modules as emergency healthcare facilities for rapidly deployable medical response solutions and our conducting testing services at such facilities, we also distribute and sell”) GeneFinder™ COVID-19 Plus RealAmp Kit™ PCR tests pursuant to a non-exclusive distributorship agreement that we entered into with Osang Healthcare Co Ltd (“Osang”) a Republic of Korea company in April 2020.

Prior to October 2019, our business model was solely a project-based construction model pursuant to which we were responsible for the design and construction of finished products that incorporated our technology primarily to customers in the multi-family housing, restaurant, military and education industries throughout the United States.

Our partnership with Clarity Lab Solutions, LLC (“Clarity Labs”) in Boca Raton, Florida, a CLIA-certified laboratory, has allowed us to provide laboratory testing in our Modules.

During 2021, we also began to focus on acquiring property to build multi-family housing communities that allows us to utilize the manufacturing services of Echo.

Prior to October 2019, our business model was solely a project-based construction model pursuant to which we were responsible for the design and construction of finished products that incorporated our technology primarily to customers in the retail, restaurant, military and education industries throughout the United States.

In October 2019, we changed our business model for our residential building construction to a royalty fee model and entered into a five-year exclusive license with CPF GP 2019-1 LLC (“CPF”) under which CPF licensed on an exclusive basis our proprietary technology and intellectual property to develop and commercialize products in the United States (and its territories) for residential use, including, without limitation, single-family residences and multi-family residences, but excluding military housing.

On June 15, 2021, we terminated the exclusive license by mutual agreement and ceased our royalty fee model.

Prior to the COVID-19 pandemic, our core customer base was comprised of architects, landowners, builders and developers who use our Modules in commercial and residential structures.

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In March 2020, we began increasing our focus on providing our Modules as health care facilities for deployable medical response solutions.

In May, we entered into a partnership with Grimshaw and Osang for deployment of our D-Tec suite of prefabricated health facilities for on-site immediate COVID-19 testing.

In May, we entered into a joint development agreement with Grimshaw Design to assist with the deployment of our D-Tec suite of prefabricated health facilities for on-site immediate COVID-19 testing.

In September 2020, we entered the U.S.

test lab market by forming a joint venture with Clarity Labs , a manufacturer and market leader of rapid diagnostic tests, to launch CLIA-certified laboratories.

Our joint venture with Clarity has allowed us to not only supply our D-Tec suite of prefabricated health facilities but also allows us to provide testing services at such facilities .

Our joint venture with Clarity Labs has allowed us to not only supply our D-Tec suite of prefabricated health facilities but also allows us to provide testing services at such facilities.

We have supplied our building modular coronavirus testing centers and provide testing services for Los Angeles International Airport (LAX), Memorial in Wayne County, Michigan and have been selected as a Trusted Testing Partner (TTP) for Hawaii’s COVID-19 travel testing program.

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Echo catered to the military, education, administration facilities, healthcare, government, commercial and residential customers.

This acquisition has allowed us to expand our reach for our Modules and offers us an opportunity to vertically integrate a large portion of our cost of goods sold, as well as increase margins, productivity and efficiency in the areas of design, estimating, manufacturing and delivery.

On February 24, 2021, we announced the execution of our option to acquire Echo's real estate holdings.

License Agreement with CPF GP 2019-1 LLC

On October 3, 2019, we entered into an Exclusive License Agreement (the “License Agreement”) with CPF, which at the time was one of our customers, pursuant to which we granted CPF an exclusive license (the “License”) solely within the United States and its legal territories to commercialize our GreenSteel™ proprietary technology, intellectual property, any improvements thereto, and any related permits, in order to develop and commercialize products within the field of design and project management platforms for residential use, including, without limitation, single-family residences and multi-family residences, but excluding military housing.

As a result of the License, with respect to residential construction using our GreenSteel technology (other than residential construction for the military) in the U.S., we are neither responsible for constructing the Modules that are based on our technology nor responsible for the related costs.

Instead, that service is performed by CPF and its subcontractors and our revenue under the License is generated from the royalties we receive from CPF based on the gross revenue that CPF receives from sales of these products based upon our licensed technology.

The License Agreement has an initial term of five (5) years, with automatic renewal provisions for subsequent five (5) year periods.

The License Agreement provides for customary termination provisions, including the right by us to terminate if CPF fails to make the minimum royalty payments described below.

In addition to the exclusion for military housing, our Ridge Avenue Project (described below) was excluded from the License.

Echo also produces pre-fabricated modular containers, for both residential and commercial use, using wood as the base material instead of steel containers, which activities are not subject to the License.

See “Other Modular Products” below.

In consideration for the License, during the initial term, CPF agreed to pay us a royalty of (i) five percent (5%) on the first $20,000,000 of gross revenues derived from CPF’s commercialization of the License (net of customary discounts, sales taxes, delivery charges, and amounts for returns) (the “Gross Revenues”), (ii) four and one-half percent (4.5%) on the next $30,000,000 of Gross Revenues, and (iii) five percent (5%) on all Gross Revenues thereafter (collectively, the “Royalty”), subject to the following minimum royalty payments determined on a cumulative basis during the initial term:

This acquisition has allowed us to expand our reach for our Modules and has offered us an opportunity to vertically integrate a large portion of our cost of goods sold, as well as increase margins, productivity and efficiency in the areas of design, estimating, manufacturing and delivery.

2021 Real Estate Developments

During February 2021, we formed SGB Development Corp.

(“SG DevCorp”), our wholly owned subsidiary, which was formed for the purpose of real property development utilizing our technologies and our manufacturing facility.

On May 10, 2021, we acquired a 50+ acre site in Lago Vista, Texas for $3,500,000, paid in cash, pursuant to the Unimproved Property Contract, dated February 25, 2021, with Northport Harbor LLC.

The acquired parcel sits on Lake Travis on the Colorado River in central Texas and subsequent to the year ending December 31, 2021, the property is listed for sale.

On May 31, 2021, SG DevCorp, acquired a 50% membership interest for $600,000 in a limited liability company that is building affordable housing in the Atlanta, Georgia metropolitan area to be known as “Norman Berry Village”.

SGB DevCorp has partnered with CMC Development Group, a New York City-based real estate development firm with national expertise providing design build services.

We expect the project to develop 125,000 square feet and build approximately 138 units at Norman Berry Village.

On June 24, 2021, SG DevCorp, as member, entered into an Operating Agreement, with Jacoby Development, Inc., a Georgia corporation (“JDI”), as manager, dated June 24, 2021 (the “Operating Agreement”), for JDI-Cumberland Inlet, LLC, a Georgia limited liability company (“JDI-Cumberland”), pursuant to which we acquired a 10% non-dilutable equity interest (“LLC Interest”) in JDI-Cumberland and agreed to contribute $3,000,000 in capital to it for the development of a 1,286 acre waterfront parcel in downtown historic St.

Marys, Georgia (the “Project”).

SG DevCorp in conjunction with Jacoby Development of Atlanta, Georgia expects to develop a mixed-use destination community.

The closing on the 1,286-acre waterfront parcel occurred prior to the end of Q2 2021.

The Operating Agreement provides JDI with the right, at its option, to purchase the LLC Interest from SG DevCorp on or before June 24, 2023 for $3,000,000, plus an amount equal to an annual internal rate of return (IRR) on such funds of forty (40%) percent (i.e., $1,200,000 annualized).

After June 24, 2023, the Operating Agreement provides JDI with the right, at its option, to purchase the LLC Interest from SG DevCorp for $3,000,000, plus an amount equal to an IRR of thirty-two and one-half (32.5%) percent (i.e., $975,000 annualized).

The Operating Agreement also provides that if JDI receives a good faith, bona fide written offer from an unaffiliated third party to purchase all or any portion of the Project, JDI shall first offer the Project to SG DevCorp at the same price Echo, entered into a Fabrication and Building Services Agreement (“Building Services Agreement”) with JDI-Cumberland to design, fabricate and install various improvements for the Project using modular structures, pursuant to budgets prepared by SG Echo submitted for approval to JDI-Cumberland, including a marina, town center, apartments and single family units, townhomes, commercial, retail and lodging buildings/structures, eco-tourism park, camping yurts, cabins and cottages.

The Building Services Agreement has an initial term of three years, with two-year automatic renewal provisions.

On July 14, 2021, SG DevCorp issued a Real Estate Lien Note, dated July 14, 2021, in the principal amount of $2,000,000 (the “Note”), secured by a Deed of Trust, dated July 14, 2021, on its 50+ acre Lake Travis project site in Lago Vista, Texas and a related Assignment of Leases and Rents, dated July 8, 2021, for net loan proceeds of $1,958,233 after fees.

The Note has a term of one (1) year, provides for payments of interest only at a rate of twelve percent (12%) per annum and may be prepaid without penalty commencing nine (9) months after its issuance date.

If the Note is prepaid prior to nine (9) months after its issuance date, a 0.5% prepayment penalty is due.

SG DevCorp intends to use the proceeds of the Note for its development project.

On October 28, 2021, SG Echo entered into a Lease Agreement (the “Lease”) with May Properties, LLC, to lease an approximately 56,775 square foot facility located at 101 Waldron Road in Durant Oklahoma (the “Premises”).

The date on which SG Echo will become responsible for paying rent under the Lease (the “Lease Commencement Date”) will be the earlier of (i) the date SG Echo begins to operate its business on the Premises or (ii) ninety (90) days after October 28, 2021.

The initial term of the Lease will commence on the Lease Commencement Date and expire one hundred and twenty (120) months after the Lease Commencement Date, with two five-year options to renew.

SG Echo’s monthly base rent for the Premises will start at $15,991.63 commencing on the Lease Commencement Date and will increase at the rate of two percent (2%) on an annual basis up to a maximum monthly base rent of $19,111.47.

The leased Premises is expected to add two new production lines for Echo to manufacture projects for our subsidiary, SG DevCorp and others customers.

Upon Echo completing certain improvements to the Premises, it will receive a credit against future rent, not to exceed $750,000, for the cost and expense of the improvements to be applied pro rata over the remaining term of the Lease.

The Lease also grants Echo an option to purchase the Premises for (i) $1,000,000 after the fifteenth (15th) through the end of the twenty-fourth (24th) full calendar month of the Lease or (ii) $1,050,000 during the twenty-fifth (25th) through the end of the thirty-sixth (36th) full calendar month of the Lease.

Pursuant to a Guaranty Agreement, dated October 28, 2021, Echo’s obligations under the Lease have been guaranteed by the Company.

In connection with the Lease, Echo entered into a Loan Agreement (“Loan Agreement”) with the Durant Industrial Authority (the “Authority”) pursuant to which it received $750,000 to be used for improvements on the Premises and issued to the Authority a non-interest bearing Forgivable Promissory Note in the principal amount of $750,000 (the “Durant Note”).

The Durant Note is due on April 29, 2029 and guaranteed by us, provided, if no event of default has occurred under the Durant Note or Loan Agreement, one-third (1/3) of the balance of the Durant Note will be forgiven on April 29, 2027, one-half (1/2) of the balance of the Durant Note will be forgiven on April 29, 2028, and the remainder of the balance of the Durant Note will be forgiven on April 29, 2029.

The Loan Agreement includes a covenant by Echo to employ a minimum of 75 full-time employees in Durant Oklahoma and pay them no less than 1.5 times the federal minimum wage, and provides SG Echo 24 months to comply with the provisions.

On November 10, 2021 we entered into a Purchase Agreement ("Purchase Agreement) with the Durant Industrial Authority to acquire 100% ownership of approximately 114 mixed-use acres in Durant, Oklahoma for $865,000.

We anticipate building approximately 300 residential units and up to 680,000 square feet of industrial manufacturing space on the mixed-use property.

The closing on the 114 mixed-use acres occurred in the first quarter of 2022.

Terminated License Agreement with CPF GP 2019-1 LLC

On June 15, 2021, we terminated that certain Exclusive License Agreement, dated as of October 3, 2019 (the “License Agreement”), with CPF, pursuant to which we had granted CPF an exclusive license solely within the United States and its legal territories to our technology, intellectual property, any improvements thereto, and any related permits, in order to develop and commercialize products within the field of design and project management platforms for residential use, including single-family residences and multi-family residences, but excluding military.

In connection with the termination of the License, we entered into a Settlement and Mutual Release Agreement (the "Settlement and Mutual Release Agreement") with CPF, and Capital Plus Financial, LLC (“Capital Plus”), a limited partner of CPF, pursuant to which the License Agreement was terminated, we released CPF and CPF MF 2019-1 LLC (“CPF MF”) for any claims in exchange for releases from CPF and Capital Plus and we received an assignment of CPF’s right under certain circumstances to a $1.25 million redemption distribution from CPF MF under its Operating Agreement.

We and Paul Galvin previously made loans to CPF in the principal amount of $650,000 and $100,000 evidenced by promissory notes pursuant to the terms of a certain Loan Agreement.

The loans are unaffected by the Settlement and Mutual Release Agreement and remain in effect and outstanding in accordance with the terms of the notes evidencing such loans.

Under the License Agreement, during the initial term, CPF had agreed to pay us a royalty of (i) five percent (5%) on the first $20,000,000 of gross revenues derived from CPF’s commercialization of the license (net of customary discounts, sales taxes, delivery charges, and amounts for returns) (the “Gross Revenues”), (ii) four and one-half percent (4.5%) on the next $30,000,000 of Gross Revenues, and (iii) five percent (5%) on all Gross Revenues thereafter (collectively, the “Royalty”), subject to the following minimum royalty payments determined on a cumulative basis during the initial term:

$500,000 in year 1, $750,000 in year 2 , $1,500,000 in year 3, $2,000,000 in year 4, and $2,500,000 in year 5.

During the year ended December 31, 2020, we did not receive any royalty payments under the License.

If the License Agreement is extended beyond the initial term, then the parties have agreed to negotiate in good faith the royalty rate and the minimum royalty payments for the renewal term(s).

In addition, to the extent CPF sublicenses any aspect of the License to a sublicensee, CPF will pay to us fifty percent (50%) of all payments received by CPF from such sublicensee.

We may also provide CPF with professional services with respect to the License, and CPF will reimburse us for employees’ time, materials, and expenses incurred in providing such professional services.

CPF also separately agreed to reimburse us for any third-party expenses incurred by us in developing our remaining and future residential projects.

The License Agreement provides for customary indemnification obligations between the parties and further provides that CPF will indemnify us for any claims arising out of the commercialization of the License by CPF or any of its subsidiaries, contractors, or sublicensees.

In addition, the License Agreement provides that we will provide CPF with cost estimates for the fabrication and manufacturing of residential projects in our existing pipeline as of the date of the License Agreement, and if such projects cannot be reasonably constructed and installed at or below such estimates, then CPF may withhold payment of any royalty due to us under the License Agreement on a dollar-for-dollar basis to offset the costs above the originally estimated amounts.

On October 3, 2019, we entered into a Loan Agreement and Promissory Note (the “Loan Agreement”) with CPF GP, which was amended on October 15, 2019 and further amended on November 7, 2019 pursuant to which we agreed to loan CPF GP $750,000 at an annual interest rate of five percent (5%), with a maturity date of July 31, 2023.

Under the Loan Agreement, as amended agreed to advance to CPF GP the first installment of the principal amount, equal to $500,000, no later than January 31, 2020 and the second installment of the principal amount, equal to $250,000, no later than April 15, 2020.

As security for this loan, we received a security interest in all of CPF GP’s membership interests in the Licensee.

During the year ended December 31, 2021 and 2020, we did not receive any royalty payments under the License Agreement.

On October 3, 2019, we had entered into a Loan Agreement and Promissory Note (the “Loan Agreement”) with CPF, which was amended on October 15, 2019 and further amended on November 7, 2019, pursuant to which we agreed to loan CPF $750,000 at an annual interest rate of five percent (5%), with a maturity date of July 31, 2023.

Under the Loan Agreement, as amended, we agreed to advance to CPF the first installment of the principal amount, equal to $500,000, no later than January 31, 2020 and the second installment of the principal amount, equal to $250,000, no later than April 15, 2020.

As security for this loan, we received a security interest in all of CPF’s membership interests in CPF MF, a Texas limited liability company of which CPF GP is the general partner.

If we failed to fund either principal installment, such failure would have constituted a default under the Loan Agreement and a cross default under the License Agreement.

On January 21, 2020, pursuant to the Loan Agreement, CPF GP issued to us a promissory note in the principal amount of $400,000 (the “Company Note”) and issued to Paul Galvin, our Chairman and CEO, a promissory note in the principal amount of $100,000 (the “Galvin Note”).

The transaction closed on January 22, 2020, on which date we loaned CPF GP $400,000 and Mr.

Galvin personally loaned CPF GP $100,000 on behalf of us.

The Company Note and Galvin Note bear interest at five percent (5%) per annum, payable, together with the unpaid principal amount of the promissory notes, on the earlier of the July 31, 2023 maturity date or upon the liquidation, redemption sale or issuance of a dividend upon the LLC interests in CPF MF 2019-1 LLC, a Texas limited liability company of which CPF GP is the general partner;

On January 21, 2020, pursuant to the Loan Agreement, CPF issued to us a promissory note in the principal amount of $400,000 (the “Company Note”) and issued to Paul Galvin, our Chairman and CEO, a promissory note in the principal amount of $100,000 (the “Galvin Note”).

The transaction closed on January 22, 2020, on which date we loaned CPF $400,000 and Mr.

Galvin personally loaned CPF $100,000 on behalf of us.

provided, that the terms of the Galvin Note provide that all interest payments due to Mr.

Galvin under the Galvin Note shall be paid directly to, and for the benefit of, our Company.

Distribution Agreement with Osang

In April 2020, we expanded our product offerings and began focusing on medical projects.

On April 30, 2020, we entered in a Distributorship Agreement (as amended, the "Distributorship Agreement") with Osang, effective as of April 28, 2020, for its GeneFinder TM COVID-19 Plus RealAmp Kit TM , designed to detect SARS-CoV-2 (Severe Acute Respiratory Syndrome-Coronavirus 2), the virus that causes COVID-19, through gene-based reverse transcription reaction and real-time polymerase chain reaction (PCR) testing process.

On April 30, 2020, the Distributorship Agreement was amended to provide us with certain additional warranties from Osang.

The Distributorship Agreement is Osang's standard form of distributorship agreement and provides us with the non-exclusive right to distribute Osang's GeneFinder COVID-19 Plus RealAmp Kit in the United States for a stated term of one (1) year.

Pursuant to the terms of the Distributorship Agreement, we are required to make payment for 100% of any purchase order prior to shipment of the product from Osang, though we do not expect to make any cash outlays with respect to any product that we distribute and expect instead to require any third-party purchasers to make the necessary cash outlays as part of a purchase order entered into with us.

The Distributorship Agreement does not guarantee us a specific quantity of kits to sell or a customer list, and may be terminated by either party at any time on thirty (30) days' notice.

At the end of 2020, we began sales of the GeneFinder COVID-19 Plus RealAmp Kits.

To date, the Distribution Agreement has not yielded the anticipated benefits or generated significant revenue.

On October 12, 2020, we and Osang, entered into a Managed Supply Agreement (the “Supply Agreement”) relating to the consignment (the “Consignment”) to us for 180 days of two (2) million units of Osang's flagship Genefinder Plus RealAmp Covid-19 PCR Test (the “Product”) from Osang for the cold-chain storage and distribution of Product in the United States of America and Canada by us on behalf of ourself, as well as for Osang to other distributors in Territory as well as for direct sales by Osang worldwide where permissible for a period of 180 days thereafter.

The Supply Agreement provides that we have no payment obligation to Osang for the Consignment until we sell the Product and that any unsold Product will remain the responsibility of Osang, except that we are responsible for the cold-storage fees.

Notwithstanding Osang’s agreement to use its best efforts to sell the Products from the Consignment with priority, to date Osang has not drawn one unit of Product from the Consignment.

On April 14, 2021, we filed suit against Osang for breach of contract and fraud seeking damages in the amount of $12 to $15 million in U.S.

District Court in the Eastern District of New York (CV 21-1990).

Legal Proceedings.

Joint Development Agreement with Grimshaw

Joint Development Agreem ent with Grimshaw

On May 27, 2020, we entered into a Joint Development Agreement with Grimshaw Design, LLC ("Grimshaw").

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On November 19, 2020, we and Memorial Hospital, of Michigan (“Memorial), entered into a Professional Services and Capital Support Contract (“PSCSC”) with Wayne County, Michigan to appoint Memorial the primary contractor for the construction of portable on-site laboratory facilities for COVID-19 testing.

The PSCCS engages the Company as a sub-contractor to render services and support to Memorial in connection with the fulfillment of statements of work submitted from Wayne County to Memorial.

The PSCCS engages us as a sub-contractor to render services and support to Memorial in connection with the fulfillment of statements of work submitted from Wayne County to Memorial.

The program deploys the D-Tec Product Series, designed by Grimshaw and developed by SG Blocks, to deliver COVID-19 PCR testing and on-site CLIA lab services directly into high risk and underserved areas.

The D-Tec 1 Units are expected to be deployed throughout Wayne County and will provide sample extraction.

Clarity Mobile Venture will be the primary operator of the facility.

Joint Venture with Clarity Lab Solutions, LLC

20,352,054 D-Tec 1 Collection Units were deployed throughout Wayne County and provided COVID-19 test samples to the CLIA lab for clinical testing services.

The COVID-19 testing program with Memorial ceased operations in November 2021.

Joint Venture w ith Clarity Lab Solutions, LLC and Chicago Airport Testing, LLC

On August 27, 2020, we entered into a joint venture agreement (the “Clarity Mobile Venture”) with Clarity Labs, a CLIA-certified laboratory based in Miami, Florida.

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This facility conducts PCR tests with results available within three hours for passengers and airline crew, and no later than 24 hours for LAX airport employees.

Additionally, other rapid coronavirus tests including antigen tests are expected to become available.

Additionally, other rapid coronavirus tests including antigen tests were deployed at LAX in 2021.

Clarity Mobile Venture is the primary operator.

On November 16, 2020, we announced that the State of Hawaii had selected Clarity Labs and Clarity Mobile Venture to provide COVID-19 testing and clinical laboratory at LAX for testing of passengers travelling between Los Angeles and Hawaii.

In January 2021, we and other third p arties formed Chicago Airport Testing LLC (“CAT”).

CAT is in the business of marketing, selling, distributing leasing and otherwise commercially exploiting certain products and services in the COVID-19 testing and other medical industry.

CAT collected rental revenue from subleasing to a consortium of government entities assisting in COVID-19 testing.

The consortium of government entities exercised their rights to vacant in third quarter 2021 and CAT has ceased operations.

For the year-end December 31, 2021, we recognized approximately $31,400,000 in revenue related to activities through these joint ventures, which i s included in medical revenue on the accompanying consolidated statements of operations.

Acquisition of Echo DCL, LLC

On September 17, 2020, we, through our wholly owned subsidiary SG Echo, entered into an Asset Purchase Agreement (“Asset Purchase Agreement”) with Echo DCL, LLC, a container/modular manufacturer that had been a key supplier of ours, to acquire substantially all the assets of Echo , except for Echo's real estate holdings, for which SG Echo has obtained a right of first refusal to acquire same.

On September 23, 2020, we, SG Echo and Echo completed the transactions as contemplated by the Asset Purchase Agreement (the “Closing”).

Pursuant to the terms of the Asset Purchase Agreement, at the Closing we paid to Echo an aggregate of $1,059,600 in cash, subject to the escrow of certain of the purchase price funds, and SG Echo agreed to pay certain of Echo’s indebtedness, including the obligation to (i) satisfy a Guidance Line of Credit loan (“GLOC Loan”) in the principal amount of approximately $616,000 ($316,432 of which payoff proceeds was delivered by SG Echo to SG DCL at the closing), (ii) pay the debt service on certain of Echo’s indebtedness in the approximate principal amount of $1.7 million for 12 months following the closing, (iii) pay the monthly principal and interest due under the BTH Credit Line in the principal amount of $500,000 for 12 months following the closing and if Seller has not fully satisfied the outstanding principal and interest due under the BTH Credit Line and caused the BTH Lender to release and terminate any Encumbrances on the Purchase Assets arising out of the BTH Credit Line, Buyer may pay the outstanding principal and interest due, and (iv) pay earn out payments equal to the net income received from the acquired business during the 3-month period beginning on the first day of the first full month that is 3 months after the closing date, the 3-month period following the first earn out period and the 3-month period following the second earn out period, payable in 50% in cash and 50% in shares of our common stock to be valued a $2.50 per share;

On September 17, 2020, we, through SG Echo, entered into an Asset Purchase Agreement (“Asset Purchase Agreement”) with Echo DCL, LLC, a container/modular manufacturer that had been a key supplier of ours, to acquire substantially all the assets of Echo , except for Echo's real estate holdings, for which SG Echo has obtained a right of first refusal to acquire same.

On September 23, 2020, we, SG Echo and Echo DCL completed the transactions as contemplated by the Asset Purchase Agreement (the “Closing”).

Pursuant to the terms of the Asset Purchase Agreement, at the Closing we paid to Echo an aggregate of $1,059,600 in cash, subject to the escrow of certain of the purchase price funds, and SG Echo agreed to pay certain of Echo’s indebtedness, including the obligation to (i) satisfy a Guidance Line of Credit loan (“GLOC Loan”) in the principal amount of approximately $616,000 ($316,432 of which payoff proceeds were delivered by SG Echo to Echo DCL at the closing), (ii) pay the debt service on certain of Echo’s indebtedness in the approximate principal amount of $1.7 million for 12 months following the closing, (iii) pay the monthly principal and interest due under the BTH Credit Line in the principal amount of $500,000 for 12 months following the closing and if Echo DCL has not fully satisfied the outstanding principal and interest due under the BTH Credit Line and caused the BTH lender to release and terminate any encumbrances on the Purchase Assets arising out of the BTH Credit Line, we have the right to pay the outstanding principal and interest due, and (iv) pay earn out payments equal to the net income received from the acquired business during the 3-month period beginning on the first day of the first full month that is 3 months after the closing date, the 3-month period following the first earn out period and the 3-month period following the second earn out period, payable in 50% in cash and 50% in shares of our common stock to be valued a $2.50 per share;

provided, that up to approximately $300,000 of any amounts paid in respect of the GLOC Loan, and any amounts paid in respect of the debt service on Echo’s indebtedness and line of credit with BTH Bank, as described in subparagraphs (i), (ii) or (iii) above, shall be offset against and reduce the earnout payments due to Echo DCL.

In no event may the number of shares of common stock to be issued to Echo exceed 19.99% of our outstanding shares on the date of the execution of the Asset Purchase Agreement.

Recent Developments

Effective December 7, 2020, the Company appointed William B.

Rogers to serve as the Company’s Chief Operations Officer.

Pursuant to an offer letter signed by Mr.

Rogers on November 11, 2020 (the “Offer Letter”), Mr.

Rogers will receive an annual salary of $300,000 per year and an annual bonus of up to 50% of his salary at the discretion of management and the Board of Directors (the “Board”) of the Company.

Rogers was issued an initial grant of 100,000 restricted stock units following a 90-day probationary period, pursuant to the SG Blocks, Inc., Stock Incentive Plan, as amended (the “Incentive Plan”) which will vest over a two-year period.

On February 17, 2021, we formed SGB Development Corp., a Delaware corporation (“SGB Dev Co”) with the express purpose of real property development utilizing our technologies.

We expect SG Dev Co will be a co-developer and owner of real estate development projects that deliver apartments and homes for sale.

The homes and apartments will be manufactured by SG Echo so that the project is fully integrated into the SGBX eco-system.

Many of the projects will utilize the products designed and manufactured through SG Home to reduce design costs, which savings can be passed on to buyers.

SGB Dev Co has announced a 225-apartment unit project known as Lago Vista on Lake Travis in booming Austin, Texas.

The land closing is scheduled for Q2 2021, and the estimated manufacturing revenue from this project alone to SG Echo is approximately $30 million dollars over 36 months.

Our profit share from sales is anticipated in the range of $5 to $7 million dollars over the period the units are sold.

Each project will have a third party real estate investor and day to day Manager so that we do not need to finance projects or be distracted from manufacturing excellence.

On February 24, 2021, we announced the execution of our option to acquire Echo’s real estate holdings in Durant, OK, consisting of a 19-acre site and all of its structures.

We expect to close on the Echo site in the second quarter of 2021.

As of December, 31, 2021, no earn out payments have been issued to Echo DCL.

Products Produced with Our GreenSteel™ Modular Technology

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Education/Student Housing

Health Care including medical laboratories

Equipment Enclosures and Stacking Solutions

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Although the construction industry is highly competitive, we are committed to educating the real estate community on the benefits of our technology and expertise and positioning the products that utilize our technology and expertise as complementary to the strategy of developers, rather than as competition.

We and CPF may compete for building opportunities with regional, national and international builders that possess greater financial, marketing and other resources than we do, and competition within the general construction industry may increase if there is future consolidation in the land development and construction industry or from new building technologies that could arise.

We may compete for building opportunities with regional, national and international builders that possess greater financial, marketing and other resources than we do, and competition within the general construction industry may increase if there is future consolidation in the land development and construction industry or from new building technologies that could arise.

Within the modular building space, we compete against a small number of companies providing modular-building services.

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Military, the Native American Community, the QSR operators, individuals and families requiring COVID-19 tests and a host of entrepreneurs looking to launch ideas and technology.

At December 31, 2020 and 2019, 79% and 92%, respectively, of the Company’s gross accounts receivable were due from three and one customers.

Revenue relating to three and two customers represented approximately 61% and 78% of the Company’s total revenue for the years ended December 31, 2020 and 2019, respectively.

At December 31, 2021 and 2020, 78% and 79%, respectively, of the Company’s gross accounts receivable were due from four and three customers.

Revenue relating to one and three customers represented approximately 80% and 61% of the Company’s total revenue for the years ended December 31, 2021 and 2020, respectively.

Our Suppliers and Partners

Although the primary use of shipping containers is for transportation, when constructing SGBlocks, we use standard materials to modify the container shell structure and finish out the modules.

In addition, we use the same standard construction materials to construct and finish out the wood base modules produced at Echo.

We utilize the same suppliers and materials used by conventional construction.

Materials such as windows, doors, insulation mechanical systems, electrical systems and other such supplies are all off-the-shelf materials and equipment commonly available and used in the industry.

One of the main suppliers for the procurement of our containers is ConGlobal Industries, Inc.

(“ConGlobal”), an independent third party, with whom we have an exclusive 10-year Collaboration and Supply Agreement (the “ConGlobal Agreement”) through May 14, 2024.

ConGlobal is one of the largest depot operators in the United States.

This arrangement provides us with a reliable source of supply of certified shipping containers.

The ConGlobal Agreement provides that ConGlobal will be our exclusive supplier of SGBlocks for housing, office and retail uses generally constructed as permanent structures within the continental United States within a 50 mile radius of an existing ConGlobal site and ConGlobal will not supply shipping containers modified for building purposes to any entity competing with us during the term of the agreement.

The Company believes it has access to alternative suppliers, with limited disruption to the business, should circumstances change with its existing suppliers.

We believe we have access to alternative suppliers, with limited disruption to the business, should circumstances change with its existing suppliers.

Intellectual Property

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In June 2017 and December 2019, we completed public offerings of our common stock, which currently trades on the Nasdaq Capital Market under the symbol “SGBX.”

Our principal offices are located at 17 State Street, 19th Floor, New York, NY, 10004.

Our principal offices are located at 5011 Gate Parkway, Building 100, Suite 100 Jacksonville, FL 32256.

Our website address is www.sgblocks.com.

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Recent Financing Developments

In April 2020, we completed a public offering of common stock (the "April Public Offering").

In connection with the April Public Offering, we sold 440,000 shares of common stock at a public offering price of $4.25 per share, resulting in aggregate net proceeds of approximately $1,522,339 after deducting underwriting discounts and commissions and other expenses related to the offering.

We incurred a total of approximately $347,661 in issuance costs in connection with the offering and no warrants to purchase were issued to the underwriters.

In May 2020, we completed a public offering of common stock (the "May Public Offering").

In connection with the May Public Offering, we sold 6,000,000 shares of common stock at a public offering price of $2.50 per share.

Pursuant to the terms of the related Underwriting Agreement dated May 6, 2020 by and among the Company and ThinkEquity, a division of Fordham Financial Management, Inc., as representatives of several underwriters named therein ("ThinkEquity"), ThinkEquity was granted an over-allotment option to purchase up to an additional 900,000 shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), in connection with the previously announced public offering.

On May 15, 2020, ThinkEquity exercised in full such option with respect to all 900,000 shares of the Company's Common Stock (the "Option Shares").

After giving effect to the full exercise of the over-allotment option, the total number of shares of Common Stock sold by us in the May Public Offering was 6,900,000 shares of Common Stock and total net proceeds to us, after deducting underwriting discounts and commissions and other offering expenses payable by us, were approximately $15,596,141.

We incurred a total of approximately $1,653,859 in issuance costs in connection with the offering and issued warrants to purchase 300,000 shares of common stock to the underwriters.

On October 27, 2021, we closed a registered direct offering and concurrent private placement that we effected pursuant to the Securities Purchase Agreement that it entered into on October 25, 2021 with an institutional investor and received gross proceeds of $11.55 million.

Pursuant to the terms of the Purchase Agreement, we issued to the investor (A) in a registered direct offering (i) 975,000 shares of our common stock, par value $0.01 per share (the “Common Stock”), and (ii) pre-funded warrants to purchase up to 2,189,384 shares of Common Stock and (B) in a concurrent private placement, Series A warrants to purchase up to 1,898,630 shares of Common Stock.

Human Capital

We believe that our success depends upon our ability to attract, develop and retain key personnel.

As of December 31, 2020, SGB directly employed thirteen full-time employees and engaged outside professional firms and subcontractors to deliver projects to customers, and SG Echo directly employed thirty-seven full-time employees.

As of December 31, 2021, SGB directly employed eighteen full-time employees and engaged outside professional firms and subcontractors to deliver projects to customers, and SG Echo directly employed sixty-nine full-time employees.

Health and Safety

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business